Every repayment mortgage payment does two jobs. Part of it pays the interest the lender has charged that month, and the rest pays down the loan itself, which lenders call the capital. The payment is set so that, if nothing changes, your last payment clears the balance to the penny.
The Formula in Plain English The calculator uses the standard repayment formula: M = P r (1 + r)^n / ((1 + r)^n - 1). P is the loan, r is the monthly rate (the yearly rate divided by 12, so 4.5% becomes 0.375%) and n is the number of monthly payments (25 years is 300). Put £200,000 at 4.5% over 25 years through it and you get £1,111.66 a month. I checked every figure on this page against that formula by hand.
Why Early Payments Are Mostly Interest Interest is charged on what you still owe, so it is at its highest right at the start. On that £200,000 example, the first payment is £750 of interest and only £361.66 off the loan. After five years you still owe about £175,716. This is the bit that trips people up when the first annual statement lands. It speeds up later, though: by year 20 the balance is down to about £59,629 and most of each payment is capital.
Fixed Rate vs Tracker On a fixed rate your payment stays the same for the deal period, often two or five years. On a tracker it moves with the Bank of England base rate, up or down. Either way the deal ends and the rate changes, so the figure this calculator shows is a snapshot, not a promise for 25 years. Most of my clients fix for the certainty, but a tracker can suit you if you want flexibility.
Mortgage repayments explained
The mortgage repayment calculator gives you the number. This part explains what sits behind your monthly mortgage repayments, the choices that move it most and what I would check before you build a budget around it.
You pay interest and capital every month, and the balance falls to nothing by the end of the term. Payments are higher than interest only, but the home is yours outright at the end. It is what most lenders offer and what nearly all of my residential clients have.
You only pay the interest, so the monthly cost is much lower. On £200,000 at 4.5% it is £750 a month against £1,111.66 on repayment. The catch is that the whole £200,000 is still owed at the end. Lenders want a believable plan to pay it back, such as investments, a pension or selling, and many ask for a bigger deposit and a higher income.
Some lenders let you split the loan, with part on repayment and part on interest only. It brings the payment down while still clearing some of the debt. You still need a plan for the interest only slice. Run each part through the calculator separately and add the two payments together.
Interest only, by a long way, because you never reduce what you owe. Over 25 years at 4.5%, an interest only mortgage of £200,000 costs £225,000 in interest and you still owe the £200,000. The repayment version costs £133,499 in interest and you owe nothing. An interest only mortgage suits people with a real plan, not anyone hoping to make a mortgage look cheaper.
These figures come from the standard repayment formula and assume the rate stays at 4.5% for the whole term. They are an illustration, not a quote, and 4.5% is just an example rate, not today's best buy.
Monthly payments on a £200,000 repayment mortgage. The rates are examples to show the effect, not rates on offer.
| Interest rate | 20 years | 25 years | 30 years | 35 years |
|---|---|---|---|---|
| 3.5% | £1,160 | £1,001 | £898 | £827 |
| 4.5% | £1,265 | £1,112 | £1,013 | £947 |
| 5.5% | £1,376 | £1,228 | £1,136 | £1,074 |
| 6.5% | £1,491 | £1,350 | £1,264 | £1,208 |
Read across a row and the payment falls as the term gets longer. Read down a column and every 1% on the rate adds roughly £105 to £135 a month. Going from 25 to 35 years at 4.5% saves about £165 a month, but total interest rises from £133,499 to about £197,534. Cheaper each month, but the total cost goes up.
Most fixed and tracker deals let you overpay up to 10% of the balance each year without an early repayment charge, but check your own terms first. Paying an extra £100 a month on the £200,000 example would save £21,142 in interest and clear the mortgage 3 years and 6 months sooner. Our mortgage overpayment calculator works out your own figures.
Before you commit, run the numbers at a higher rate. Lenders do their own affordability checks to see if you could still pay when rates rise, and it is worth doing the same for your own budget. On £200,000 over 25 years, 4.5% is £1,111.66 a month and 7.5% is £1,477.98. If the higher figure would break your budget, look at a longer fix, a smaller loan or a bigger deposit.
Stretching the term is the quickest way to cut the monthly payment, and plenty of first time buyers now take 35 years or more. Just go in with your eyes open about the extra interest. You can often shorten the term later when you remortgage, or overpay to bring the end date forward, so you get the lower payment now with a way out later.
It shows the mortgage payment only. It does not include product fees, buildings insurance, life cover or the cost of the move itself, such as stamp duty and legal fees. If you add a £999 product fee to the loan, put the higher figure in. Our stamp duty calculator and moving home calculator cover the rest.
Compare the payment with what you pay in rent or on your mortgage now, then leave yourself some slack. A payment you can just about afford today feels very different after a rate change or a new baby. If you are buying, a mortgage in principle is the next step. It shows a lender is likely to lend that amount before you make an offer.
If your deal is ending, put in your remaining balance and the new rate to see what changes. Moving to a new mortgage deal rather than sliding onto the lender's standard variable rate can make a difference of hundreds of pounds a month. See our remortgage advice, or read product transfer vs remortgage to decide which route suits you.
How do I work out my monthly mortgage repayment? Use the formula M = P r (1 + r)^n / ((1 + r)^n - 1), where P is the loan, r is the yearly rate divided by 12 and n is the number of months. Or use the mortgage repayment calculator above to find out how much it would be: enter the loan, rate and term and the monthly payment appears straight away.
How much is a £200,000 mortgage a month? At 4.5% over 25 years on a repayment basis, about £1,111.66 a month. Over 30 years it is about £1,013.37 and over 35 years about £946.51. On interest only at 4.5% it is £750 a month, but the full £200,000 is still owed at the end.
Is this mortgage repayment calculator accurate? It uses the same standard formula lenders use, so for one fixed rate over the full term it should be within a few pence. Real payments differ because rates change when deals end, some lenders work interest out daily and fees can be added to the loan. Use it as a guide and check the illustration you are given, which is based on your personal circumstances.
What is the difference between a repayment and an interest only mortgage? With repayment you pay the interest and some of the loan every month, so you owe nothing at the end. With interest only you pay just the interest, so payments are lower but the whole loan is still owed when the term ends and you need a separate plan to pay it back.
Does a longer mortgage term save money? No. It lowers the monthly payment but costs more overall. On £200,000 at 4.5%, a 35 year term instead of 25 years cuts the payment by about £165 a month but adds about £64,000 in interest.
How much more would I pay if my rate went up by 1%? On £200,000 over 25 years, going from 4.5% to 5.5% adds £116.51 a month. The calculator works this out for your own figures in the box under your results.
Can I change my mortgage term later? Usually, yes. You can ask your lender to lengthen or shorten the term, or change it when you remortgage. Lengthening it means a new affordability check and lenders have age limits, so it is not automatic.
Why is my lender's monthly payment slightly different? Lenders round in different ways, some charge interest daily rather than monthly, and the first payment often includes extra days of interest from completion to the end of that month. Fees added to the loan also push the payment up a little.
Does the calculator include fees and insurance? No. It shows the mortgage payment only. Product fees, valuation fees, buildings insurance and life cover are separate. If you are adding a fee to the loan, include it in the loan amount.
How much can I borrow? Most lenders lend around 4 to 4.5 times income, and some go higher for certain incomes or professions. Our borrowing calculator gives you a quick estimate, and we can check real lender criteria for your situation.
